Domestic airlines look to revive zero bag fares in order to grow traffic

Domestic airlines are preparing to offer lower fares for passengers without bags in a bid to improve seat occupancy and grab market share.

IndiGo’s chief executive officer Ronojoy Dutta indicated the airline’s interest to offer the zero bag fares in an interaction with Bloomberg. Regulatory caps on fares and capacity related to Covid-19 have prevented IndiGo from taking a decision and the airline is discussing the issue with the government, he said. “We’re waiting for everything to settle down before we lock something,” he stated.

IndiGo’s rivals Go First and SpiceJet too are keen on offering zero bag fares, industry sources said. Go First is even looking to amend reservation systems in order to provide differential fares for those without check-in bags and hand bags weighing less than seven kilograms, it is learnt. “But a decision can’t be taken unless fare caps are removed,” a source said.

The zero bag fares were first introduced in India by SpiceJet in 2015 and soon followed by other low cost airlines. However, these did not catch on. Initially the discount offered in zero bag fare was only Rs 200. This also allowed other airlines to match prices and offer free baggage at the same price. The product also faced regulatory

challenges on the issue of fees that an airline could charge in case a passenger (who purchased zero bag fare) came to the airport with check-in bags.

But with the intensifying competition and increasing cost pressures airlines are looking at ways to unbundle services. Reviving the zero bag fare is one such option. While the Directorate General of Civil Aviation’s February circular on unbundling of services allows airlines to offer zero bag fares it came with a caveat. These fares can be offered till fare caps remain in place.

“Even now passenger load factors are around 70-80 per cent. The zero bag fare would help improve seat occupancy and help lure passengers by offering special fares. This could help in targeting corporates and same day return travellers,” an aviation industry executive said. Zero bag fares will work if the difference between it and lowest

normal fare is substantial, he said.

Domestic airline executives also point out that fares in India are among the lowest in the world, drawing comparisons with the US where airlines charge for carry-on bags. In India airlines are required to provide 15 kg of check-in bags free.

Allowing airlines to charge for bags, seat selection, meals among others are ancillary revenue sources for airlines. Such fares would help airlines improve their revenues amid cost pressures, executives point out.

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